Are farmers paying enough for water in the Coachella Valley? Critics charge growers on water board have kept rates 'unfairly low'

Mark Johnson worked for years as engineering director at the Coachella Valley Water District. Now that he’s retired, he’s criticizing the district's policies, saying the system of water rates and taxes should be overhauled.

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Water flows through the Coachella branch of the All-American Canal near farms in the eastern Coachella Valley. In the distance is the Salton Sea.(Photo11: Jay Calderon/The Desert Sun)Buy Photo

The Coachella Valley Water District’s board is considering raising the rates it charges farmers, golf courses and other well owners based on how much groundwater they pump.

That upcoming decision has brought criticism of the stark, longstanding difference between the relatively low rates paid by well owners in the east valley, including the area’s farmers, and the much higher rates for well owners in the cities of the west valley.

Some critics argue that the rates in the east valley have been kept unduly low by board members whose farming businesses benefit from those lower rates. In the past week, the three CVWD board members who work in agriculture have faced questions about potential conflicts of interest as they prepare to decide on the rates.

Randy Roberts, a critic of CVWD who lives in Palm Desert, spoke at a meeting on Wednesday and called for three of the five board members — John Powell, Jr., Peter Nelson and Anthony Bianco — to recuse themselves from discussions about the groundwater-pumping rates in the area of the east valley dubbed the East Whitewater River Sub-basin. He said the proposed rate increase, which would keep rates much lower in the east valley than in the west valley, is an example of “self-dealing” by board members who run agricultural businesses.

“These proposals are a sham that only benefit Big Ag and in particular our three board members. That’s why I’m requesting recusal,” Roberts said. “The intent of my request is to ensure board members do not profit illegally or unethically from decisions they make.”

Powell, the board president, said he and other board members don’t face conflicts in their decisions on rates.

District Counsel Jeff Ferre agreed and said this sort of rate-setting decision falls under an exception in California ethics regulations that says public officials don’t need to recuse themselves when the financial effect on their interests is “indistinguishable” from its effect on the public in general.

Roberts presented the district with a letter detailing various decisions that he thinks point to mismanagement and potential violations of conflict-of-interest rules.

“I ask the board to hire an independent outside legal team to determine if there has been malfeasance and what the appropriate remedies should be,” Roberts said. As he left the meeting, he said he’s examined the district’s finances and the rates in the east valley are “unfairly low.”

“They’re not paying their fair share,” Roberts said. “In reality, all of our rates go up because we have to subsidize it.”

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Randy Roberts points at Coachella Valley Water District Board President John Powell, Jr., while raising concerns about potential conflicts of interest during a meeting on Wednesday in Coachella.(Photo11: Ian James/The Desert Sun)

Ferre said the proper procedures are being followed and no independent review is necessary.

The debate about possible conflicts of interest has grown after Powell sought an opinion from California’s Fair Political Practices Commission on a separate issue: whether the law bars him from taking part in voting on a proposed pipeline that would carry Colorado River water to farmlands in Oasis.

In October, Ferre recommended that Bianco, Nelson and Powell recuse themselves from discussions of the project because they all own or work for businesses that would get water from the pipeline.

The three left the room, and an employee drew a name from a hat to choose which of the three could rejoin the board so there would be a quorum to consider the proposal.

It turned out to be Powell, and that means he’ll be able to vote on the project if it comes up again.

Though the procedure is allowed under California law in such circumstances, it was controversial. The proposed $58 million plan is on hold for now and isn’t in the district’s five-year spending plan. It’s not clear when it might come up again.

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After the October name-drawing, Powell said he heard that a group of constituents doubted that any of the board members actually had a conflict that would preclude them from voting on creating an assessment district for the pipeline. So, he wrote to the Fair Political Practices Commission, which enforces conflict-of-interest laws, to ask.

In a Feb. 16 response, the commission’s lawyers told Powell that the law “prohibits you from taking part in those decisions because they would have a reasonably foreseeable material financial effect on your real property interest.”

Powell is president and CEO of Peter Rabbit Farms and has farmland that would get water from the pipeline if it’s built. He said he also spoke with a commission official, who confirmed verbally that the name-drawing procedure was done properly. That wasn’t mentioned in the letter.

During the meeting, Roberts quoted from the commission’s letter and said it’s “absolutely applicable” to rate-setting, and that board members should declare the “potential impact” their decisions will have on their financial interests.

Ferre disagreed, saying in an email that the commission’s letter focuses on the Oasis pipeline question and doesn’t apply to decisions on rates. He said the so-called “public generally exception” in state regulations applies when elected officials set rates in districts where they live and work.

“If the decision effects all customers the same way, the exception applies,” Ferre said in an email. “There is no conflict according to this long-established exception.”

Jay Wierenga, communications director for the Fair Political Practices Commission, said the commission doesn’t comment on specific situations or people.

Different rates in different areas

CVWD’s board members plan to decide soon on increasing the so-called “Replenishment Assessment Charge,” or RAC rates, starting in July. The rates are paid by well owners that pump more than 25 acre-feet, or 8.1 million gallons, of water per year, and they’re intended to cover the costs of imported water and facilities where water flows into ponds and replenishes the aquifer.

The water district, the largest in the Coachella Valley, has long divided its territory into three different “areas of benefit” and charged well owners different groundwater replenishment rates in each one.

In the Mission Creek Sub-basin near Desert Hot Springs, the rate is $135.52 for each acre-foot, or 325,851 gallons. In the West Whitewater River Sub-basin, the rate is now $143.80 per acre-foot. CVWD’s staff has proposed raising both of those rates under a previously approved schedule of increases. How much those rates might go up this year isn’t clear.

In the East Whitewater area, in contrast, well owners now pay $66 an acre-foot – less than half as much as the other areas.

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Sprinklers soak a field in Coachella in 2016.(Photo11: Richard Lui/The Desert Sun)

The CVWD board is considering a proposal to raise the East Whitewater rate by a maximum of $7 a year for the next five years, which would mean an increase to as much as $73 this July. A previous 2016 rate study had recommended the last increase of $7 in 2017, but not the rate increases that are currently proposed.*

The agency is preparing to mail out notices explaining the proposed rates increases to east valley property owners, including the 337 customers that pump groundwater from wells and pay the rates. Customers include the cities of Indio and Coachella, which pump water to supply domestic customers, as well as golf courses, homeowners’ associations and farms that produce crops including grapes, lemons, dates, carrots and peppers.

In addition to pumping groundwater, the valley’s growers use Colorado River water, which flows through the Coachella branch of the All-American Canal to an irrigation system that fans out across fields from Coachella to the north shore of the Salton Sea.

Local districts have been using imported water to recharge the aquifer near Palm Springs since 1973, and well owners in the western portion of the valley have paid rates to cover the costs.

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Homes and golf courses at Sun City Palm Desert are surrounded by undeveloped desert in this aerial view, March 26. 2018.(Photo11: Jay Calderon/The Desert Sun)

Up until the 2000s, though, the district didn’t replenish the aquifer in the east valley and didn’t charge well owners for the groundwater they pumped. That changed starting in 2004, when CVWD started charging $4.86 an acre-foot in the east valley.

That rate gradually climbed to $17 an acre-foot by 2009, when the district began recharging the aquifer at the newly built Thomas E. Levy Groundwater Replenishment Facility in south La Quinta, a series of ponds where Colorado River water seeps into the ground. Since then, rates have gone up $7 each year.

The latest proposal of continuing to raise rates $7 a year in the east valley fits with a previous negotiated agreement that the district had with a committee of stakeholders, CWVD General Manager Jim Barrett said. The way those increases have worked, Barrett said, is that the district has revisited the finances each year and any expenses that haven’t been covered by the $7-a-year increase “were basically rolled forward” to be covered in future years.

In 2013, CVWD’s board chose to use $60.3 million from the Domestic Water Fund to provide a loan to the East Whitewater fund. That loan has been used to pay for construction costs of the groundwater replenishment facility in La Quinta, and the funds are being gradually paid back.

“The fund seems to be fairly well balanced,” Powell said. “We’re paying back the loan to domestic that was used to finance the purchase of the land and the construction.”

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Water flows into a pond at the Thomas E. Levy Groundwater Replenishment Facility in La Quinta.(Photo11: Jay Calderon/The Desert Sun)

Powell said he plans to consider input from customers before deciding whether to support the staff’s recommended rate increase or propose a different approach.

At a meeting on Tuesday, the board will consider sending out notices of the possible rate increases for east valley well owners. People will be able to file a protest and speak at a May 22 hearing before the board votes on the rate increase.

Powell said it makes sense to a have different rates in the east valley and the west valley because there’s a huge difference in costs between the Colorado River water that comes via canal to the east valley and the district’s contract for much more expensive water from the State Water Project in the west valley. Because the canals and pipelines of the State Water Project don’t reach the Coachella Valley, local agencies trade their allotments to the Metropolitan Water District for equivalent amounts of water — “bucket for bucket” — from the Colorado River Aqueduct.

“The main driver is the cost of the water: very different in the west than in the east,” Powell said in an interview. Because the water in the west valley costs about 10 times more, that makes for different rates — and he insisted the system makes sense.

“I don’t understand why someone would make the argument that a customer in Mecca would have to pay the same as a pumper in Rancho Mirage,” Powell said. “A pumper in Mecca benefits very little from activities in Whitewater and frankly, a pumper in Rancho Mirage benefits very little from replenishment activities in La Quinta.”

Powell accused Roberts of making “irresponsible statements” about a potential conflict of interest.

“I don’t use my own personal situation to make decisions,” Powell said.

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Sprinklers water a field along Harrison Street near 58th Avenue in Thermal, with a view of the Santa Rosa Mountains in the distance.(Photo11: Richard Lui/The Desert Sun)

Bianco deferred questions about the accusations to Ferre, who said there is no disqualifying conflict.

Bianco, who was elected in 2016, manages the company Anthony Vineyards, which produces table grapes. A 2013 CVWD document listed the company as the largest agricultural groundwater user in the east valley, pumping about 7,500 acre-feet per year, which at the time translated into an estimated annual assessment of $338,274.

As for possible rate increases, Bianco said he’s looking at multiple alternatives.

“One that I have directed staff to look at is not raising rates in the west or east. And starting in 2020 put together some long term financing that will spread the costs out over many years,” Bianco said in an email. “I look forward to analyzing this option more fully, both myself and with my colleagues on the board. I believe this could be the best option for CVWD customers, but I won’t know until I get to see it in detail.”

Rates called ‘unfair’

Roberts pointed to a list of financial decisions by the board that he finds troubling.

Among them, during a March 2015 meeting, CVWD’s staff made a presentation raising the idea of consolidating rates for all three areas into a single rate.

The presentation said the East Whitewater Replenishment Fund “has never fully recovered its costs due to its rate structure.” It said the district’s use of funds from the State Water Project tax, which is listed on property tax bills simply as “Coachella Valley Water District,” has enabled the East Whitewater Replenishment Fund to have enough to pay down the loan from the Domestic Water Fund for the construction of the La Quinta replenishment facility.

The presentation said a legal opinion from CVWD’s attorneys at the time concluded the State Water Project tax — which is set at 10 cents per $100 of assessed property value — “can only be used” to pay invoices for water from the State Water Project.

CVWD officials said later, however, that they’re properly using those tax revenues. Powell has said that using the funds for the costs of replenishing groundwater in the east valley is legal and fair — a stance that has provoked debate.

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A vineyard borders the open desert on Avenue 47 near Vista del Sur in Coachella.(Photo11: Richard Lui/The Desert Sun)

The CVWD staff’s March 2015 presentation listed proposed rate increases that would have created a single, consolidated rate of $116 per acre-foot by 2018 — 43 percent higher than the $66 that well owners in the east valley are now paying.

The board decided against consolidating rates, however, and chose to continue managing the three areas separately.

Roberts accused CVWD of undercharging in the east valley, saying the growers on the board had kept the rates artificially low “so they can get their water as cheap as possible.”

During last week’s meeting, he read from a document that CVWD released in July 2015 explaining the increase that year, which raised the rate for east valley well owners to $59 per acre-foot. The document touched on the possibility of future rate increases, saying: “Because much of the costs of constructing and operating groundwater replenishment facilities in eastern Coachella Valley have been deferred, significant RAC increases are needed to ensure the charges are equitable and represent what it costs CVWD to deliver groundwater replenishment to the East Valley.”

Summing up the situation, Roberts said the CVWD board “cannot make the East Whitewater Replenishment Fund work without raising their personal RAC rates.”

“This they refuse to do, and pass it on to everyone else,” Roberts said. “Instead, the board votes their personal windfall financial enrichment.”

While the board members strongly deny that’s the case, Roberts isn’t alone in criticizing the rates and the way the district is managing its finances.

Mark Johnson, CVWD’s former engineering director, has said the district should move toward universal rates and taxes across the Coachella Valley.

Since his retirement in 2016, Johnson has become a vocal critic, writing a blog on local water issues. He argues that farmers are being undercharged and homeowners are being overcharged. He’s also said the CVWD board is “fraught with conflict issues.”

Johnson said he’s sees a problem in looking at his own water bill for his home in La Quinta. Like all CVWD domestic customers, a portion of his bill is a groundwater replenishment rate that blends together the district’s costs for wells across the valley.

“I’m paying almost double through my water bill the Replenishment Assessment Charge than an agricultural pumper, and it’s just not fair,” Johnson said.

As Johnson sees it, the district should have one single groundwater replenishment rate for all well owners.

“Everybody pays the same, and that would eliminate this territorial stuff, who gets which water, because it’s all interconnected,” Johnson said. He’s advocating a list of changes to rates and fees that he says would make the system fair.

“I believe there have been conflicts of interest that resulted in unfair water rates, charges and taxes. Whether they’re legally conflicts, I don’t know. But morally, they are,” Johnson said. Referring to the board members who work in agriculture, he pointed out that they represent big farming operations “where these decisions are impacting the bottom line of their companies.”

In a letter to the board last week, Johnson detailed his proposals. In addition to moving to a single rate for all groundwater pumpers, he proposed that State Water Project tax revenues only go toward State Water Project bills; that the property tax be based on acreage rather than assessed property value so that agricultural landowners would pay more; and, among other things, that there be one rate for Colorado River water delivered via canal rather than the current system, in which agricultural customers are charged a third of the “class 2” rates paid by golf courses and other non-ag customers in the east valley.

These approaches, Johnson wrote, would “eliminate the existing unfair, inequitable and discriminatory water taxes, rates and charges and the obvious conflicts of interest that led to this situation.”

There will be more debate before the CVWD board decides how much — and whether — to raise groundwater pumping rates this year.

Board member Patrick O’Dowd said during last week’s meeting that he disagrees with using funds from the State Water Project tax to supplement the East Whitewater Replenishment Fund.

Since “it’s one aquifer,” O’Dowd said, the costs of importing water to replenish it should be spread across the entire district.

*Editor’s note: A previous version of this story contained incorrect information about a proposal to raise rates for well owners.